Energy Powers Beverage Sales

The convenience of shots and the widespread  availability in c-stores have spurred the category’s success.

By: Joe Bush, Contributing Editor.

Energy shots remain the hottest product in the energy beverage sector. The emergence of the shot market was so fast that the products seemingly came out of nowhere, at a time when the typically strong energy drink market began showing signs of maturation and softening sales due to the slowing economy.

The growth of shots is all the more remarkable because these two to three-ounce beverages also sport a premium price tag, costing up to $3 a bottle.

Retailers report energy shots sales demographics include customers who need energy, but might not have purchased energy drinks in the past. With little or no sugar in the product, energy shots are advertised as helping
consumers avoid the “crash” associated with sugar-laden energy drinks. Small enough to make it through a TSA airport security check, consumable in one gulp, and low in calories while still high in stimulants, the reduced size of the energy shot also has one main advantage the previous generation does not:  the reduced bladder impact of the smaller volume of liquid.

For the retailer, the energy shot advantage is threefold: their small size—about the size of a white out bottle—allows them to be placed just about anywhere in the store, although they sell best next to the register. Additionally, they can be consumed warm, saving valuable cooler space, and their standard price, of about $2.99, gives them a significant ring.

The sector is dominated by Living Essentials’ 5-Hour Energy line. Shots grew across all channels at a 146% clip from 2008 to 2010, according to Chicago-based research firm Mintel in its 2010 report on energy drinks and shots. Mintel projected growth for energy shots of 147% from 2010 to 2015.

Expanded Product Lines
Open Pantry Food Marts of Wisconsin, the 30-store chain in Pleasant Prairie, Wis., features eight energy shot SKUs—six of them from Living Essentials. To differentiate, the chain uses small countertop refrigerators in 12 of its 27 stores to chill its four SKUs. Five of the 12 are college campus stores.

“The college kids really seem to love the chilled shots,” said Open Pantry marketing manager Jackie Mancl.
Open Pantry does a brisk enough business in energy shots to devote countertop space near the checkout area in all stores. Red Bull sponsors a three-tier rack that holds two Red Bull shot SKUs and six Living Essentials. A new shots player, Hansen’s Worx, sponsors a two-tier rack.

Mancl said she doesn’t promote energy shots as much as the full-sized cans, primarily because the shots don’t need it.“Now that most of the world has become health-conscious, consumers know they can get a shot of energy without having to drink for the next 45 minutes,” Mancl said.

Open Panty foresees Red Bull, the leader in full-size drinks, and Living Essentials, the shots leader, expanding into more flavors. Mancl was also quick to point out what comes in a can or small bottle will never replace the original boosting beverage. “Coffee will always be our No. 1 energy drink,” she said.

What Customers Want
Craig Smith, a businessman from Springfield, Mo., is a longtime energy drink user who hasn’t switched to shots. Smith buys primarily from c-stores, QuikTrip and Kum & Go, and takes advantage of two-fers. He only buys sugar-free, and only what’s on sale.

He illustrated the guilty pleasure of energy drinks that keep habitual drinkers coming back for more. “The buzz is the selling point,” Smith told CSD during consumer intercepts in Missouri last month. “After a grueling workout, and a small breakfast, an energy drink at about 10 a.m. on an almost empty stomach is one of my favorite feelings. The buzz is exceptional.  I tried to quit cold-turkey and cannot.” 

The entire energy drinks/shots category added 9.3 million new users aged 18 and over from 2005 to 2007, but it added just one million from 2007 to 2009. Convenience store sales and growth remains strong—the channel outperformed all others with the highest dollar gains from 2008 to 2010 ($200 million).

According to Mintel, more than seven out of 10 consumers aged 18 and over do not consume energy drinks and shots.

Worse, 69% of these non-users said they are not interested in trying the category. Mintel said there are signs in its numbers that consumers who are hesitant to try energy drinks and shots can be persuaded. It offered these tips to drive trials:

• Offering a free sample at stores where non-users usually shop for beverages would bring in 16% of non-users to the energy drinks category and encourage 14% of non-users to try energy shots.
• Some 14% are likely to drink energy drinks if they are priced in the range of $1 per can/bottle.
•About 13% would like to see energy drinks made from natural ingredients (8% for energy shots) with less sugar.
• Some 14% (11% for energy shots) are likely to consume energy drinks if they have natural ingredients.
• Availability of energy drinks in favorite flavors can attract 11% of non-users to drink energy drinks and 8% to use energy shots.

Functional Focus
Six months ago, Open Pantry jumped on the latest functional beverage—the relaxation drink. Fortified with melatonin, a naturally-occurring hormone, these formulas are marketed as having the opposite effect of energy drinks. Open Pantry sells iChill Beverage’s iChill—its tagline is “Unwind from the Grind”—a shot that claims to reduce stress and improve sleep without carbohydrates, calories or sugar.

Mancl said her experience with iChill—Open Pantry category managers always try new products—was pleasant. “It’s very relaxing,” she said. “It really did mellow me out.”

The iChill shots are displayed next to the energy shots, and though Mancl said consumers are still unsure of relaxation products, sales have been brisk. It was distributed to all stores, which re-ordered within a month, she said.

Dennis Lane, as a 7-Eleven franchisee for the past 36 years in Quincy, Mass., has never shied from trying new products. He is the past chairman of the National Coalition of 7-Eleven Franchise Owners and the current president of the New England chapter of 7-Eleven Franchise Owners.

“I was told years ago to be cautious with Red Bull, that it was a fad,” Lane said. “That would have been an awful mistake.”

Lane has embraced e-cigarettes, and for the past five months, has sold brands of relaxation shots including RelaxZen, iChill and DreamWater. He has also tried all three and said they work. “They take the edge off, and you don’t need to take a nap,” said Lane, who markets the relaxation brands near the energy shots by the register, which is prime not only for spontaneous purchases, but for new products. “It’s the best piece of real-estate in the store.”
Having relaxation shots by the register allows associates to explain the products to prospective customers.

“With the economy, the stress we’re under, someone had the foresight to see a market for it,” said Lane. “For as many customers that need an energy boost, there’s a certain amount that want to calm down. There’s a need for it and, more importantly, there’s a consumer for it.”

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